Eagle Nice (International) Holdings (HKG:2368) Will Pay A Larger Dividend Than Last Year At HK$0.14

The board of Eagle Nice (International) Holdings Limited (HKG:2368) has announced that the dividend on 15th of September will be increased to HK$0.14, which will be 17% higher than last year. This takes the dividend yield from 8.3% to 8.8%, which shareholders will be pleased with.

See our latest analysis for Eagle Nice (International) Holdings

Eagle Nice (International) Holdings' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Eagle Nice (International) Holdings was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the trend of the last few years continues, EPS will grow by 10.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was HK$0.10, compared to the most recent full-year payment of HK$0.34. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Eagle Nice (International) Holdings has seen EPS rising for the last five years, at 11% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Eagle Nice (International) Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Eagle Nice (International) Holdings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Eagle Nice (International) Holdings that investors need to be conscious of moving forward. Is Eagle Nice (International) Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.